Sumitomo Metal Mining Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥783.36B
• Net Income: ¥57.91B
• EPS: ¥198.12

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Sumitomo Metal Mining (IFRS, consolidated) posted FY2026 Q2 revenue of 7,833.61 (100M JPY), down 2.1% YoY, while net income rose 16.0% YoY to 539.40 (100M JPY), indicating resilient bottom-line support despite softer top-line. Gross profit was 824.54 (100M JPY), implying a gross margin of 10.5%, with SG&A at 354.79 (100M JPY), or 4.5% of sales, reflecting disciplined overheads. Operating income was not disclosed; however, a core operating profit proxy (gross profit minus SG&A) indicates roughly 469.75 (100M JPY), or an estimated operating margin of about 6.0%, subject to IFRS classification caveats. Profit before tax reached 778.15 (100M JPY), exceeding the implied core operating result, suggesting positive contributions from non-operating items and/or fair value gains; equity-method income was 58.49 (100M JPY). The effective tax rate stood at 32.4%. Notably, total comprehensive income was negative at -223.55 (100M JPY), implying sizable other comprehensive income (OCI) losses of roughly -762.95 (100M JPY), likely from FVTOCI securities, exchange translation, or commodity hedge valuation. DuPont metrics show net margin of 6.9%, asset turnover of 0.259, and financial leverage of 1.52x, yielding an ROE of 2.7% for the period, in line with the reported figure. Cash generation was solid with operating cash flow of 803.58 (100M JPY) exceeding net income (OCF/NI = 1.49x), but free cash flow was negative at -242.59 (100M JPY) due to elevated capex of 675.96 (100M JPY). The balance sheet remains robust with total assets of 30,243.22 (100M JPY), equity of 19,957.30 (100M JPY), and an equity ratio of 59.7%; the reported debt-to-equity ratio is 0.51x, although detailed interest-bearing debt components are unreported. Liquidity analysis is constrained by missing current liability details, but cash and equivalents were 1,597.12 (100M JPY). Dividend cash outflow of 173.10 (100M JPY) indicates a cash payout of roughly 32% of interim net income, while the provided payout ratio of 56.1% likely reflects an annualized or policy basis; FCF coverage in the period was negative (-0.80x). The divergence between strong net income and negative comprehensive income highlights market-driven equity volatility risks that reduced book value accretion in the quarter. Inventories are sizable at 5,678.00 (100M JPY), a key working capital lever and source of commodity price sensitivity under IFRS measurement. Overall, earnings quality appears reasonable given OCF strength versus net income, but investment cash needs remain high as the company advances growth projects, likely in battery materials and upstream mining. The outlook hinges on metal price trends (nickel/copper/gold), smelting margins, battery materials demand, and FX movements. Data gaps (notably operating income, current liabilities, and debt detail) limit precision of margin, liquidity, and coverage analysis; conclusions below focus on disclosed, non-zero data and clearly labeled estimates.

Profitability Analysis

roe_decomposition: ROE 2.7% = Net margin 6.9% x Asset turnover 0.259 x Financial leverage 1.52x. The low asset turnover reflects capital intensity and the half-year period base; leverage is modest given a 59.7% equity ratio. margin_quality: Gross margin 10.5% (824.54/7,833.61). SG&A ratio 4.5%, indicating controlled overheads. Operating income is unreported; using gross profit minus SG&A implies an estimated core operating margin near 6.0%, but IFRS classification (other operating income/expenses, fair value changes) may materially affect true operating margin. Net margin improved to 6.9%, supported by non-operating gains (PBT 778.15 exceeds implied core operating profit) and equity-method contributions (58.49). Effective tax rate at 32.4% is within a normal range for the group. operating_leverage: Revenue declined 2.1% YoY while net income grew 16.0% YoY, suggesting positive operating leverage aided by cost discipline and supportive below-OP items. Depreciation and amortization of 324.13 (100M JPY) underscores high fixed-cost absorption; modest changes in volumes/prices can swing margins. OCI losses do not affect operating leverage but weigh on equity and book value.

Growth Assessment

revenue_sustainability: Top-line softness (-2.1% YoY) likely reflects lower commodity prices or volumes in mining/smelting/materials segments. Inventories at 5,678.00 (100M JPY) suggest scope for volume normalization but also price exposure. profit_quality: OCF/NI at 1.49x indicates earnings backed by cash generation. PBT exceeded implied core operating profit, pointing to reliance on non-operating or valuation gains; sustainability depends on equity-method income, FX, and fair value conditions. Negative comprehensive income (-223.55) reveals market valuation headwinds that could persist if metals and FX remain volatile. outlook: Key drivers are nickel and copper prices, smelting treatment charges, battery materials demand (EVs), and USD/JPY. Continued capex indicates commitment to growth in materials and upstream, but near-term FCF will be pressured. If commodity prices stabilize and project execution stays on track, core profitability can normalize; otherwise, margins could remain constrained.

Financial Health

liquidity: Cash and equivalents were 1,597.12 (100M JPY). Current assets total 9,762.94 (100M JPY), but current liabilities are unreported; therefore, current and quick ratios are not assessable from XBRL. Working capital reported as 9,762.94 (100M JPY) reflects current assets only and should not be interpreted as CA−CL. solvency: Total equity is 19,957.30 (100M JPY) vs total assets of 30,243.22, implying assets-to-equity of ~1.52x and an equity ratio of 59.7%, a strong capital base. Debt-to-equity is reported at 0.51x, but interest-bearing debt details and interest expense are unreported, limiting coverage analysis. capital_structure: Retained earnings are 12,888.53 (100M JPY), capital surplus 875.18, supporting balance-sheet resilience. Negative OCI in the period reduced total comprehensive income, weighing on equity and potentially on BVPS (calculated BVPS 7,376.50 JPY). Financing cash inflow of 434.68 (100M JPY) suggests net borrowing or other financing to support capex and dividends.

Cash Flow Quality

earnings_quality: Operating CF of 803.58 (100M JPY) vs net income of 539.40 yields OCF/NI of 1.49x, indicating solid cash conversion. Depreciation of 324.13 provides non-cash support, consistent with capital-intensive operations. fcf_analysis: Free cash flow was -242.59 (100M JPY), reflecting capex of 675.96 and broader investing cash outflows of -1,046.17. The negative FCF underscores ongoing investment cycle; financing CF (+434.68) bridged the gap alongside cash on hand. working_capital: Accounts receivable stood at 1,960.35 (100M JPY) and inventories at 5,678.00, both key determinants of OCF volatility given commodity price swings and shipment timing. Accounts payable of 2,464.28 provides trade financing; current liability granularity is missing, constraining detailed WC efficiency analysis.

Dividend Sustainability

payout_ratio_assessment: Dividends paid were 173.10 (100M JPY) in cash during the period, about 32% of net income. The provided payout ratio of 56.1% likely references an annualized DPS or policy basis relative to full-year earnings; clarification from company guidance is needed. fcf_coverage: FCF coverage was -0.80x, indicating dividends were not covered by free cash flow in the half-year due to elevated capex; coverage improves if capex moderates or OCF strengthens in H2. policy_outlook: Given the strong equity base (59.7% equity ratio) and access to financing, near-term dividend capacity appears supported, but sustainability at higher payout levels hinges on commodity cycle, OCF stability, and execution of capex-heavy growth projects.

Risk Assessment

Business Risks:

• Commodity price volatility for nickel, copper, and gold affecting mining and smelting margins
• Demand variability for battery materials tied to EV adoption and inventory cycles
• Operational risks at smelters/refineries and project execution risks for large capex (e.g., HPAL and materials expansions)
• Supply chain and geopolitical risks in resource jurisdictions
• Environmental, permitting, and ESG compliance costs

Financial Risks:

• Negative OCI volatility impacting equity and BVPS via FVTOCI and currency translation
• Interest rate and FX risks (USD/JPY) affecting earnings and valuations
• FCF shortfalls during investment cycle requiring external funding
• Working capital swings due to inventory and receivables under commodity price changes
• Potential impairment risk if commodity prices weaken or projects underperform

Key Concerns:

• Large OCI loss (~-763 (100M JPY)) in the period reduced comprehensive income
• Unreported operating income and interest-bearing debt details limit margin and coverage transparency
• Negative FCF amid high capex pressures near-term cash generation despite healthy OCF

Investment Implications

Key Takeaways:

• Resilient net profit (+16% YoY) despite -2.1% revenue decline indicates cost control and supportive non-operating items
• Cash conversion is solid (OCF/NI 1.49x), but FCF negative due to capex
• Balance sheet strength (equity ratio 59.7%, D/E 0.51x) provides flexibility during the investment phase
• Significant OCI losses drove negative comprehensive income, weighing on book value progression
• Earnings sensitivity to metals prices, FX, and equity-method results remains high

Metrics to Watch:

• Operating income and operating margin (once disclosed) vs implied 6.0% estimate
• Nickel and copper price trends, smelting treatment/refining charges
• Battery materials volume/mix and capex execution milestones
• OCF, capex, and FCF trajectory; dividend coverage by FCF
• OCI components (FVTOCI, FX translation) and impact on equity/BVPS
• Inventory levels and turnover vs commodity price movements

Relative Positioning: Within Japanese non-ferrous peers, SMM remains a scale leader with integrated mining-to-materials exposure and a stronger equity base than many domestic peers, offering resilience but with higher earnings cyclicality due to nickel and upstream exposure; growth in battery materials is a structural positive but capital-intensive.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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